There are numerous ways Amazon (AMZN -1.09%) stands to benefit from artificial intelligence (AI). Some of the more obvious efficiencies can be gained through robotics or more targeted advertising, both of which stand to improve the company's logistics and e-commerce operations.
In my eyes, the biggest opportunity for AI-driven growth touches the company's cloud infrastructure business, Amazon Web Services (AWS). Amazon CEO Andy Jassy has already hinted that the company's custom Trainium, Inferentia, and Graviton chips could be sold externally. Meanwhile, Jassy has made it clear that Amazon's data center build-outs are a core pillar supporting the company's broader AI roadmap.
One thing investors seem to overlook, however, is that AWS has also leaned into neocloud capacity deals to supplement its own infrastructure. With Amazon scheduled to report earnings on July 30, I think Jassy could announce a new neocloud agreement -- specifically with Nebius Group (NBIS +0.57%). Let's dig into why a deal between AWS and Nebius could make sense.
Amazon CEO Andy Jassy. Image source: Amazon.com.
What are neoclouds, and how does Amazon use them?
Unlike traditional hyperscalers that juggle a multitude of general-purpose services, neoclouds focus almost exclusively on leasing high-performance GPU clusters. Companies such as CoreWeave and Nebius provide cloud-based capacity featuring accelerators from Nvidia to their end customers.
Nebius has already signed a deal worth up to $19 billion with Microsoft and another worth up to $27 billion with Meta Platforms. Back in November, AWS signed a 15-year lease agreement with Cipher Mining worth $5.5 billion. Cipher will deliver 300 megawatts of high-performance compute to AWS through a new data center campus in Texas.
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Key Data Points
Why AWS and Nebius look like a good match
A partnership between AWS and Nebius comes with a number of mutual benefits. For AWS, Nebius brings scalable GPU capacity backed by a deep relationship with Nvidia that includes priority access to next-generation chips. Moreover, Nebius' ecosystem can integrate with AWS services like Bedrock.
In addition, Amazon's new $25 billion bond deal is a clear signal that the company cannot use its own free cash flow to fund the entirety of its AI infrastructure vision. This makes collaborating with a neocloud to bridge capacity demand even more appealing.
For Nebius, a deal with AWS provides even more hyperscaler revenue visibility and further validation at the highest level. It also opens doors to AWS's vast enterprise customer base and ecosystem tools, helping accelerate adoption beyond its existing relationships.
Image source: The Motley Fool.
Nebius stock could soar on news of another hyperscaler deal
The deals with Meta and Microsoft feature firm capacity reservations for thousands of GPUs over multiple years, proving Nebius can handle hyperscaler demand. Adding AWS to its ecosystem would diversify Nebius's customer base, reduce revenue concentration risk, and signal broader industry acceptance of neocloud platforms.
All told, the combination of AWS's market leadership and Nebius's specialized capacity creates a compelling opportunity in the AI infrastructure era. A deal between the two parties would serve as a powerful catalyst for Nebius stock as it highlights the ongoing shortage of AI compute -- positioning the stock for outsize gains as AI build-outs accelerate.
